After more than four years in Morgan Stanley's stable, FrontPoint Partners is an independent firm once more.

The beleaguered hedge fund completed its long-awaited spin-off from the investment bank today. The move comes after Morgan Stanley accelerated matters, hoping to rid itself of a unit that within the last few months has been inundated with redemption requests after it was linked to an insider-trading scandal, performance sank and a top manager made rumblings about moving on.

No money changed hands in the transaction, which gives 75% of the firm's equity to the hedge fund's "portfolio managers and senior management team" and 25% to Morgan Stanley. The bank hopes to recoup some of the $400 million it paid for FrontPoint in 2006 by taking a share of its revenues over the next five years, although Morgan Stanley has reportedly already written off most of its investment in the hedge fund.

The once-$10 billion firm manages just $4.5 billion, having decided to shutter its $1.5 billion healthcare unit after its top manager was implicated—although not charged—in an insider-trading case involving a French doctor. Further redemptions compounded matters.

"Everyone at FrontPoint is focused on generating investment performance, and we are delighted to be moving forward as an independent entity with Morgan Stanley as our partner," CEOs Dan Waters and Michael Kelly said in a letter to investors.

The FrontPoint-Morgan Stanley divorce was not finalized without some controversy. The New York Post reported that as things proceeded towards the break, some FrontPoint managers threatened not to participate in the buyout. Some at FrontPoint are reportedly unhappy with how Waters and Kelly handled the insider-trading revelations and the ensuing redemptions, including star manager Steven Eisman.

"It's really a vote of no confidence in how things went down here," one anonymous manager told the Post. "I don't want to participate in a management buyout with a group of people who lied to us."

Managers who did so—if there were any—would remain FrontPoint employees but would not be a part of its new leadership structure. Eisman, for his part, has said he will remain at FrontPoint, although it's unclear if he took part in the management buyout.

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